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Tuesday, September 30, 2008

Ind. Decisions - "Mortgage Lenders Fight Off Rescission Class Action in 7th Circuit"

Reporting about the 7th Circuit's Sept. 24th decision in the case of Andrews v. Chevy Chase Bank, Pamela A. MacLean of The National Law Journal writes today:

In a boon for the mortgage lending industry, a federal appeals court has said the Truth in Lending Act does not allow for rescission of mortgages on a class action basis.

The 7th U.S. Circuit Court of Appeals, in a 2-1 decision on Wednesday, averts the potential of significant damages for creditors accused of violating disclosure requirements in some of the exotic mortgage vehicles that exacerbated the mortgage market meltdown and has Congress contemplating ways to restore credit market confidence.

The Circuit decision joins an earlier ruling by the 1st and 5th Circuits and one California state appellate court that have held that the Truth in Lending Act (TILA) does not allow claims for rescission in a class action format.

Judge Sykes' opinion begin:
In this interlocutory appeal, we are called on to answer one question: May a class action be certified for claims seeking the remedy of rescission under the Truth in Lending Act (“TILA”), 15 U.S.C. § 1635? The only two federal appellate courts to have addressed this question have answered “no,” see McKenna v. First Horizon Home Loan Corp., 475 F.3d 418 (1st Cir. 2007); James v. Home Constr. Co. of Mobile, Inc., 621 F.2d 727 (5th Cir. 1980), and we agree. TILA’s statutory-damages remedy, § 1640(a)(2), specifically references class actions (by providing a damages cap), but TILA’s rescission remedy, § 1635, omits any reference to class actions. This omission, and the fundamental incompatibility between the statutory-rescission remedy set forth in § 1635 and the class form of action, persuade us as a matter of law that TILA rescission class actions may not be maintained.
This entry this morning in How Appealing links to a Sept. 24th story in the Milwaukee Journal Sentinel, which includes some interesting quotes.

Posted by Marcia Oddi on September 30, 2008 09:49 AM
Posted to Ind. (7th Cir.) Decisions